Discussion Notes
Adam Smith on Commerce and Happiness:
A Response to Den Uyl and Rasmussen
Dennis C. Rasmussen
Tufts University
1. Introduction
In Volume 32 of Reason Papers, Douglas Den Uyl and Douglas
Rasmussen examine Adam Smith‟s views regarding commerce and happiness,
making extensive reference to my earlier article on the subject. 1 The editors
kindly invited me to respond to Den Uyl and Rasmussen, and I was very
happy to accept because they raise some important questions that call for
further discussion. I appreciate their generally sympathetic appraisal of my
article, as well as their aspiration to show that Smith can be seen as a kind of
forebear of the emerging literature on happiness or “subjective well-being” in
economics, psychology, and other fields. In what follows I would like, first,
to correct an important misinterpretation of my argument, and then to address
an interesting (and thorny) question that Den Uyl and Rasmussen raise but
that I did not take up in my article—namely, the question of whether the free
market or the welfare state would be more likely to encourage happiness,
given Smith‟s assumptions.
2. The Individual and Society
In my article as well as in a later book,2 I attempt to resolve an
apparent paradox in Smith‟s thought. On the one hand, Smith repeatedly and
insistently claims in The Theory of Moral Sentiments (and, to a lesser degree,
1
See Douglas J. Den Uyl and Douglas B. Rasmussen, “Adam Smith on Economic
Happiness,” Reason Papers 32 (Fall 2010), pp. 29-40; Dennis C. Rasmussen, “Does
„Bettering Our Condition‟ Really Make Us Better Off?: Adam Smith on Progress and
Happiness,” American Political Science Review 100, no. 3 (August 2006), pp. 309-18.
Hereafter, Den Uyl and Rasmussen‟s article will be cited in the text using page
numbers.
2
Dennis C. Rasmussen, The Problems and Promise of Commercial Society: Adam
Smith’s Response to Rousseau (University Park: Pennsylvania State University Press,
2008), esp. chap. 4.
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in The Wealth of Nations) that neither the pursuit nor the possession of
material goods does much to make people any happier, and in fact he argues
that they might jeopardize people‟s happiness. For Smith, “happiness consists
in tranquillity and enjoyment,”3 and continually toiling and striving for evermore material goods disturbs people‟s tranquility without adding much, if
anything, to their enjoyment. 4 On the other hand, Smith is almost certainly
history‟s most famous advocate of commercial society. The question, then, is
why he defends a form of society that fundamentally depends on and
encourages “the uniform, constant, and uninterrupted effort of every man to
better his condition” even though this “effort” appears to undermine people‟s
happiness.5 What is the point of promoting the wealth of nations if everyone
ends up being miserable?
I argue that the solution to this apparent paradox can be found in
Smith‟s account of the positive political effects of commerce: dependence and
insecurity are two of the chief obstacles to happiness, as Smith sees it, and so
the alleviation of these ills in commercial society constitutes a great step
forward. Complete, unalloyed happiness—the tranquility of the Stoic sage—
is all but unattainable in any society, since it will almost always be disrupted
to some degree by “the desire of bettering our condition, a desire which . . .
comes with us from the womb, and never leaves us till we go into the grave.” 6
But commercial societies do tend to alleviate the great sources of misery that
dominated most pre-commercial societies, namely, dependence and insecurity,
through the interdependence of the market and the effective administration of
justice by the government. Thus, people in commercial societies tend to enjoy
more tranquility and hence more happiness than people in other societies not
because of the material goods for which they work so hard, which in fact
prevent them from being completely happy, but rather because they are
generally free from direct, personal dependence on others and because they
generally enjoy a sense of relative safety. In short, money really cannot buy
happiness, but liberty and security can at least prevent certain misery.
Den Uyl and Rasmussen agree with my basic point that Smith sees
liberty and security as key benefits afforded by commercial society and that
these benefits help to promote happiness, at least insofar as they alleviate
misery (pp. 32, 36-37). Their main criticism is that my argument is subject to
“the fallacy of division,” meaning that I assume that what makes for a
“happy” or flourishing society will also make for a happy individual (e.g.,
3
Adam Smith, The Theory of Moral Sentiments, ed. D. D. Raphael and A. L. Macfie
(Indianapolis, IN: Liberty Fund, 1976), III.3.30, p. 149.
4
See especially ibid., I.iii.1, pp. 50-51; III.3.30-31, pp. 149-50; IV.1.8-9, pp. 181-83.
5
Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, ed. R.
H. Campbell and A. S. Skinner (Indianapolis, IN: Liberty Fund, 1976), II.iii.31, p. 343.
6
Ibid., II.iii.28, p. 341.
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tranquility) (pp. 31-33). This is a fallacy, however, that I believe I avoid.
Contrary to what Den Uyl and Rasmussen suggest (pp. 32, 33), I never speak
of a society or an economy as being “happy” or “tranquil”; these are feelings
or sensations, and so can clearly be experienced only by individuals. In fact, I
explicitly state that “Smith‟s touchstone is the happiness of the individuals
who make up a society, not some vague notion of „public happiness.‟” 7 What
I do claim is that there is a key connection between certain broad features of a
society—namely, the degree of security and personal independence it
affords—and the happiness or tranquility of the individuals who live in that
society. Again, these societal goods cannot ensure individual happiness, but
they can at least prevent the great sources of misery that have dominated most
of human history. Thus, I do not believe that “the liberty and security of a
commercial order is the same as the tranquility of the happy individual,” as
Den Uyl and Rasmussen allege (p. 32, emphasis added), or even that they are
sufficient for the tranquility of the happy individual, but rather that they are
prerequisites for the tranquility of the happy individual.
Moreover, I agree wholeheartedly with Den Uyl and Rasmussen‟s
claim that “security and freedom are not necessarily improved with each
marginal increase in wealth and goods,” and thus that people do not
necessarily become happier or more tranquil the wealthier they become (p.
35). A key burden of my interpretation of Smith, to repeat, was not only that
money cannot buy happiness, but that the pursuit of material goods tends to
undermine people‟s happiness. As I argue in more detail in my book,
according to Smith commercial society helps to secure the minimum
preconditions of happiness by alleviating some of the greatest sources of
misery, but the gains to happiness come mostly from the bottom part of the
income scale and are subject to diminishing marginal returns as wealth
increases—just as Den Uyl and Rasmussen suggest (pp. 35-36).8
Ultimately, then, the differences between my Smith and Den Uyl and
Rasmussen‟s Smith are not all that large. The key difference, in fact, has
nothing to do with whether the things that make an individual happy are the
same as the things that make a society flourish—we agree that they are not—
but rather that Den Uyl and Rasmussen go much further than I do in
specifying what form of commercial society would be best at promoting
individual happiness. In my article I demonstrate in some detail that Smith
saw commercial society as a significant improvement over what came before
it (the hunting, shepherding, and agricultural stages of society), but I do not
address the question of how different forms of commercial society—e.g., the
free market versus the welfare state—might bear on the issues of liberty,
security, or happiness. Den Uyl and Rasmussen‟s own reading of Smith
centers on this question, so I turn to it next.
7
Rasmussen, “Does „Bettering Our Condition‟ Really Make Us Better Off?” p. 312.
8
Rasmussen, The Problems and Promise of Commercial Society, pp. 168-70.
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3. The Free Market, the Welfare State, and Happiness
The relative merits of the free market and the welfare state was, of
course, not an issue that Smith explicitly addressed, or even could have
explicitly addressed, since the welfare state as we know it did not yet exist in
the eighteenth century.9 As Samuel Fleischacker has written,
the notion that states should redirect economic resources so as to
eradicate poverty had never so much as been suggested by any
serious philosopher, politician, or political movement among Smith‟s
contemporaries and predecessors. Poor relief had of course been
around for many centuries, but that was designed simply to enable
disabled and starving people to survive, not to help them rise out of
poverty altogether . . . . [T]he idea that governments should institute
a redistribution of wealth out of fairness to the poor was simply not
on the table.10
Given the vast changes in the political landscape since the eighteenth century
as well as the complex, non-ideological nature of Smith‟s thought, it is
extremely difficult to say with any degree of certainty where he would stand
on today‟s political spectrum. 11 The struggle over what stance Smith might
take on various political issues began almost immediately after his death, and
has rarely reached the level of consensus.
Den Uyl and Rasmussen‟s reading of Smith is essentially the
traditional, free market reading. Their Smith would clearly rebel against the
modern welfare state and its “encroachments upon individual liberty . . . in the
form of high progressive taxes, the erosion of property rights, and a host of
nanny-type restrictions on what people can freely do with their lives” (p. 36;
9
Indeed, even the free market was only a dream in the minds of Smith and a handful of
French économistes. The reigning economic system in Smith‟s time was not laissezfaire capitalism—terms that Smith himself never used—but mercantilism, which Smith
calls “the modern system,” the system that “is best understood in our own country and
in our own time.” Smith, The Wealth of Nations, IV.intro.2, p. 428. From Smith‟s
vantage point, “to expect . . . that the freedom of trade should ever be entirely restored
in Great Britain, is as absurd as to expect that an Oceana or Utopia should ever be
established in it”; see ibid., IV.ii.43, p. 471.
10
Samuel Fleischacker, “Review of Charles Griswold, Adam Smith and the Virtues of
Enlightenment,” Mind 109, no. 436 (October 2000), p. 919.
11
Many leading Smith scholars have argued as much. See, for example, Samuel
Fleischacker, On Adam Smith’s Wealth of Nations: A Philosophical Companion
(Princeton, NJ: Princeton University Press, 2004), pp. 263-65; Charles L. Griswold,
Jr., Adam Smith and the Virtues of Enlightenment (Cambridge, MA: Cambridge
University Press, 1999), pp. 295-96.
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cf. p. 40). There is no hint, in their account, of the side of Smith that has led
to a flowering of “left-liberal” interpretations of his thought in recent years, to
go along with the traditional “libertarian” reading. 12 In my view there are real
arguments to be made on both sides of this interpretive debate, and neither
side can claim Smith for itself alone. Thus, Den Uyl and Rasmussen‟s claim
that a strictly free market economy would best promote people‟s happiness,
given Smith‟s assumptions, seems to me a bit one-sided.
Den Uyl and Rasmussen‟s principal argument is that “with the right
kind of economy, we might . . . achieve the highest sort of „happiness‟ as an
economy and a secondary form of happiness as individuals” (p. 38). That is,
with a free market we can achieve both a continually growing economy as
well as a reasonable degree of happiness for the individual, even if not the
perfect tranquility of the Stoic sage. The “secondary” form of happiness that
they claim individuals will enjoy in this order—which they dub “individual
economic happiness”—is found not in tranquility but rather “within the nature
of commercial activity itself” (p. 39). The key to this kind of happiness, they
say, is “progress,” which for the individual means “working to build, create,
succeed at, or otherwise pursue goals that are possible and the product of
one‟s efforts” (p. 40). And they claim that this kind of happiness would be
undermined by a welfare state: “One would . . . expect a good deal of
dissatisfaction in those states where individuals do not have significant roles
in the management of the wealth they pursue and possess, such as in modern
welfare states where so much wealth is both taxed and collectively managed”
(p. 40).
Yet the sort of “individual economic happiness” that Den Uyl and
Rasmussen describe—essentially, happiness as achievement—is very
different from, and in some respects incompatible with, the true individual
happiness—the happiness of tranquility and enjoyment—that Smith returns to
again and again in The Theory of Moral Sentiments.13 Den Uyl and
Rasmussen‟s “individual economic happiness” seems to rest on precisely the
12
See, for example, Fleischacker, On Adam Smith’s Wealth of Nations; Gavin
Kennedy, Adam Smith’s Lost Legacy (New York: Palgrave Macmillan, 2005); Iain
McLean, Adam Smith, Radical and Egalitarian: An Interpretation for the 21 st Century
(Edinburgh: Edinburgh University Press, 2006; Spencer J. Pack, Capitalism as a Moral
System: Adam Smith’s Critique of the Free Market Economy (Aldershot: Edward
Elgar, 1991); Emma Rothschild, Economic Sentiments: Adam Smith, Condorcet, and
the Enlightenment (Cambridge: Harvard University Press, 2001).
13
The passage from The Theory of Moral Sentiments that Den Uyl and Rasmussen cite
(p. 40) to prove that Smith thinks “achievement” will produce satisfaction or
contentment (even if not Stoic tranquility) is drawn from a discussion of whether the
morality of an action depends at all on the consequences of that action or is determined
solely by the actor‟s intentions, and has nothing to do with whether working, building,
creating, or succeeding at things will make an individual happy. See Smith, The
Theory of Moral Sentiments, II.iii.3.3, p. 106.
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kinds of deceptions that Smith so vividly describes, such as the idea that
working, building, creating, and succeeding are what will make us happy. On
the contrary, Smith insists—even in The Wealth of Nations—that labor is “toil
and trouble,” that it requires an individual to “lay down [a] portion of his ease,
his liberty, and his happiness.”14 Indeed, in The Theory of Moral Sentiments
he forcefully warns his reader that the concern with achievement and success
is “the great source of both the misery and disorders of human life.” 15
Moreover, Den Uyl and Rasmussen‟s claim that for Smith people are
necessarily happiest in a “progressive state” or growing economy is not
particularly persuasive.16 It is obviously true that, all other things equal,
people prefer prosperity to stagnation. Yet Smith insists that material
prosperity can do little to produce true happiness, or rather that any happiness
it produces will necessarily be short-lived. Immediately after defining
happiness as “tranquillity and enjoyment,” he goes on to say that “the mind of
every man, in a longer or shorter time, returns to its natural and usual state of
tranquillity. In prosperity, after a certain time, it falls back to that state; in
adversity, after a certain time, it rises up to it.” 17 Once again, money itself
really cannot buy happiness. Rather, Smith claims that people are more likely
to attain happiness—not complete tranquility, but the level that one can
reasonably hope to reach—not through material prosperity, success, or
achievement, but rather through simpler and calmer pleasures such as the
knowledge that one has acted virtuously and rewarding relationships with
family and friends.18 These pleasures are available (though not, of course,
guaranteed) in any society that provides a tolerable degree of liberty and
security.
The question, then, is whether a free market society or a welfare state
would do more to help (or hinder) people‟s ability to realize this kind of
“tranquillity and enjoyment.” Den Uyl and Rasmussen and I agree that
14
Smith, The Wealth of Nations, I.v.2, p. 47; I.v.7, p. 50.
15
Smith, The Theory of Moral Sentiments, III.3.31, p. 149.
16
Den Uyl and Rasmussen cite (p. 38) Smith‟s claim that “it is in the progressive state,
while the society is advancing . . . that the condition of the labouring poor, of the great
body of the people, seems to be the happiest and most comfortable”; see Smith, The
Wealth of Nations, I.viii.43, p. 99. However, this passage comes in the context of a
discussion of “the liberal reward of labour” and its effect on the size of the population,
and thus “happiest” here seems to mean most thriving or prosperous rather than most
satisfied or content. Indeed, Smith goes on to remark that high wages often lead
workers “to over-work themselves, and to ruin their health and constitution in a few
years”; see ibid., I.viii.44, p. 100.
17
Smith, The Theory of Moral Sentiments, III.3.30, p. 149.
18
Ibid., I.ii.4.1, p. 39; I.ii.5.1, p. 41; III.1.7, p. 113; III.5.6-7, p. 166.
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neither form of society will guarantee complete happiness, and we also agree
that a sense of security and personal independence are necessary prerequisites
for happiness. Yet I am less sure than they are that a strictly free market
society would necessarily offer individuals a greater sense of security and
personal independence than a welfare state. It is true that people in a free
market society might feel more secure in the possession of their property,
more free from intrusions by the state in the form of taxation. But it is equally
possible that they would gain a greater sense of security and independence
from guaranteed health care, unemployment insurance, and the like—from
being less subject to the whims of the market—than they would from lower
taxes.
It might be protested that such measures smack of the kind of
“government intervention” that Smith so strongly opposed. However, the
government interventions to which Smith objected most strongly were those
designed by and intended to help the rich and powerful 19; it is far from clear
that he would also object to twenty-first century interventions designed to
curb their influence and aid the poor and the middle class. If poverty were to
cause a greater degree of insecurity and dependence among the poor than
restricting markets in some way would for the population as a whole—an
entirely plausible scenario—then it is quite possible that Smith would favor
aiding the poor even at the cost of hampering the free market to some
degree.20 Once again, I do not mean to claim here that the “left-liberal”
interpretation of Smith is the only one or even necessarily the most plausible
one. I do think, however, that this question is more open to debate than Den
Uyl and Rasmussen suggest.
19
“It is the industry which is carried on for the benefit of the rich and the powerful,
that is principally encouraged by our mercantile system. That which is carried on for
the benefit of the poor and the indigent, is too often, either neglected, or oppressed”;
see Smith, The Wealth of Nations, IV.viii.4, p. 644.
20
I have made this argument at greater length in Rasmussen, The Problems and
Promise of Commercial Society, pp. 171-73.
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